Retrenchment Package Calculator South Africa

What this calculator does — and what it deliberately does not

This tool calculates the statutory minimum retrenchment package under the Basic Conditions of Employment Act: the floor the law sets, the number a CCMA commissioner will test your payment against. It itemises the three separate components — severance pay, notice pay and the accrued-leave payout — and shows the working for each line, because a figure you cannot explain is a figure you cannot defend.

What it does not do is run the retrenchment for you. A package that is correct to the cent does not cure a consultation process that skipped Section 189 of the LRA — the procedure is where most retrenchments actually fail at the CCMA, and it starts before any number is calculated. Use this calculator for the money; use the full retrenchment guide for the process around it.

The formula, line by line

Every line starts from one number: a week’s remuneration. The BCEA converts a monthly salary to a weekly one with a fixed statutory formula — not by dividing by 4, and not by dividing by 4.33:

If the employee earns commission or works regular overtime, the law adds the average of the last 13 weeks of that variable pay to the weekly figure. Skipping this step for a salesperson is not a rounding error — it can halve the package.

1. Severance pay — Section 41

One week per completed year: an employee with 6 years and 11 months of service earns 6 weeks, not 7. “Continuous” service survives internal transfers and, under Section 197, transfers of the business as a going concern — service with the previous owner counts.

2. Notice pay — Section 37

Notice is either worked or paid out in lieu — the calculator includes it only when you tell it notice is being paid out. Either way, it is owed in addition to severance; the two are separate rights and one never absorbs the other.

3. The leave payout — Section 21

Every accrued, untaken annual leave day is paid out at the daily rate. This is the line employers most often forget entirely — it applies to every termination, and in a retrenchment it stacks on top of severance and notice.

A worked example you can check by hand

Take an employee earning R18,000 basic plus a R2,000 housing allowance (R20,000 total remuneration), with 6 completed years’ service, 10 days of untaken leave, on a 5-day week, with the 4 weeks’ notice paid out rather than worked:

Enter the same figures in the calculator above and you will get the same answer to the cent — the page and the tool run on one formula set, taken straight from the Act.

What counts as “remuneration” — the mistake that creates CCMA cases

Severance is calculated on full remuneration, defined by the Ministerial Determination issued under Section 35(5) of the BCEA — not on basic salary. Included in the calculation:

• Housing or accommodation allowances (or the value of housing provided)
• Fixed car or travel allowances (the regular, non-reimbursive kind)
• Employer contributions paid in cash in lieu of medical aid or similar benefits
• Commission and regular overtime — averaged over the preceding 13 weeks

Excluded:

• Reimbursive payments — actual expenses repaid, like per-kilometre travel claims
• Genuinely discretionary bonuses with no contractual entitlement
• Tool, equipment or similar work-enabling allowances

Calculating on basic salary alone is the single most common employer underpayment. It is also the easiest case an ex-employee can bring: the shortfall is pure arithmetic, and the CCMA orders it paid — with interest, and often with a costs lesson attached.

Voluntary vs forced retrenchment — the same formula, two traps

A voluntary severance package (VSP) is usually more than the statutory minimum — two, three or four weeks per year of service is common where an employer wants volunteers before forcing selections. The calculator still earns its keep there: the statutory minimum is the floor the offer gets measured against, and the itemised working shows the employee exactly what part of the offer is enhancement and what part the law owed them anyway.

Two traps hide in the paperwork. First, the UIF code on the UI-19: if the employer initiated the voluntary package as part of a staff reduction, the termination is recorded as a retrenchment and the employee qualifies for UIF benefits. If it is recorded as a resignation, they do not — a single code on one form decides months of benefits, so agree on it in writing before anyone signs. Second, the tax directive: the severance tax treatment applies where the termination is part of a general reduction in personnel (or the employer ceasing trade) — the directive application must describe it that way, or SARS taxes the lump sum as ordinary income.

After the package: UIF, the provident fund and medical aid

The package is one of three money conversations a retrenchment opens, and the other two are where retrenched employees most often lose value:

• UIF benefits. A retrenched employee can claim unemployment benefits: credits accrue at one day of benefit for every four days worked, up to a maximum of 365 days. The claim runs on the UI-19 with the correct termination code — issue it with the final payslip, not weeks later, because the claim cannot start without it.
• The pension or provident fund. The fund payout is separate from the severance package — but the tax is not. Retirement-fund withdrawals and severance benefits share the same lifetime R550,000 tax-free band: an employee who cashes out their provident fund at retrenchment spends the band the severance would otherwise have used. Preserving the fund (or transferring it) keeps the band intact — a decision worth a financial adviser before the withdrawal form is signed, not after.
• Medical aid and risk cover. Employer-paid cover typically ends with the exit month. The consultation is the moment to negotiate a continuation window or a conversion to an individual plan at the group rate — after the last day, that leverage is gone.

The tax treatment — two different regimes in one payment

The package is split for tax, and getting the split wrong hurts someone either way. The severance portion is taxed on the SARS retirement and severance lump-sum table: the first R550,000 of such benefits over the employee’s lifetime is tax-free (2025/26 table). That treatment is applied through a tax directive (an IRP3) the employer must obtain from SARS before paying — payroll may not simply guess the rate.

Notice pay and the leave payout never qualify. They are ordinary income under PAYE in the month of payment, no matter that they are paid in the same retrenchment. This is why the calculator itemises the package instead of showing one lump sum: payroll needs the split to withhold correctly, and the employee deserves to know which part of the promise is pre-tax.

Where this number fits in a lawful retrenchment

The calculation is the easy hour of a retrenchment. Before it, Section 189 of the LRA requires a genuine consultation process — written notice inviting consultation, disclosure of the reasons and alternatives considered, selection criteria that are fair and objective, and real engagement rather than a decision announced as done. After it, the paperwork: the employee must receive an itemised final payslip, a certificate of service, and a UI-19 form with the correct termination code so UIF benefits are not delayed. An ex-employee has 30 days to refer a dispute — your records of all of the above are the entire defence.

SOUTH AFRICAN RETRENCHMENT PACKAGE — THE STATUTORY MINIMUM (BCEA)

A lawful retrenchment package has three separate components. None replaces another.

1. SEVERANCE PAY (BCEA s41)
   1 week's remuneration per COMPLETED year of continuous service.
2. NOTICE PAY (BCEA s37) — only if notice is paid out instead of worked
   1 week (6 months' service or less), 2 weeks (more than 6 months up to a year),
   4 weeks (more than a year).
3. LEAVE PAYOUT (BCEA s21)
   All accrued, untaken annual leave at the daily rate.

THE FORMULAS
Week's remuneration = (monthly salary + regular allowances) x 12 / 52,
plus the 13-week average of commission and regular overtime.
"Remuneration" is FULL remuneration per the s35(5) Ministerial Determination
(housing allowance, fixed car/travel allowance, cash medical contributions
included) — not basic salary.
Daily rate = week's remuneration / working days per week (usually 5).

WORKED EXAMPLE
R20,000/month total remuneration, 6 completed years, notice paid out,
10 untaken leave days, 5-day week:
- Week's remuneration: 20,000 x 12 / 52          = R4,615.38
- Severance: 6 weeks x R4,615.38                 = R27,692.31
- Notice: 4 weeks x R4,615.38                    = R18,461.54
- Leave: 10 days x (R4,615.38 / 5 = R923.08)     = R9,230.77
- STATUTORY MINIMUM PACKAGE                      = R55,384.62

TAX
Severance is taxed on the SARS retirement/severance lump-sum table — the first
R550,000 (lifetime, cumulative) at 0% (2025/26 table), applied via a SARS tax
directive the employer must obtain BEFORE paying. Notice pay and leave payouts
are ordinary income under PAYE and never qualify for that band.

Source: Synthro — Retrenchment Package Calculator (South Africa)
https://www.synthro.io/tools/retrenchment-calculator-south-africa
Formulas last reviewed July 2026 against the BCEA and the 2025/26 SARS tables.